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Session 1999-2000
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Delegated Legislation Committee Debates

Draft Social Security (Incapacity Benefit) Miscellaneous Amendments Regulations 2000

Seventh Standing Committee on Delegated Legislation

Thursday 16 November 2000

[Dr. Ashok Kumar in the Chair]

Draft Social Security (Incapacity Benefit) Miscellaneous Amendments Regulations 2000

4.30 pm

The Parliamentary Under-Secretary of State for Social Security (Mr. Hugh Bayley): I beg to move,

    That the Committee has considered the draft Social Security (Incapacity Benefit) Miscellaneous Amendments Regulations 2000.

You are an experienced Committee Chairman, Dr. Kumar, but this is the first time that I have had the pleasure of serving under your guidance and I am pleased that you are part of the Speaker's Panel.

The regulations form part of the Government's strategy to modernise incapacity benefit. In the last two decades of the 20th century, there was a threefold increase in the number of people claiming incapacity benefit; in 1979 the figure was about 600,000, but now it is 1.6 million, and it is more than 2 million if all the incapacity benefit claimants—those on income support receiving the full range of incapacity benefits—are included.

The health of the population of working age improved in that 20-year period and that is why the Government introduced the modernisation plans. Some of those who claim incapacity benefit clearly cannot work, and it is important for the Government to provide security for such people through the benefits system. However, others can work; indeed, the Government's labour force survey reports that some 1 million people currently on incapacity benefit say that they wish that they were able to work—

Mr. Tim Boswell (Daventry): I assure the Minister that I am not being querulous, but I should like him to make it clear that the Government do not intend to compel to work those who are genuinely incapable of doing so on a long-term basis. Will the hon. Gentleman confirm that those people will be protected?

Mr. Bayley: If the hon. Gentleman had shown a little more patience he would have heard me talk about the new deal for disabled people, which was a great success in its pilot phase. On Monday, we set up plans to roll out the new deal as a national scheme, on the same basis as the pilot, to help people on incapacity benefit who choose to work. Compulsion does not come into it. That has never been the case and those who suggest that it is have misled and alarmed people on incapacity benefit.

The difference between this Government's policy and that of our predecessor, is that the previous Government accepted that it was the natural order of things that 1.6 million people should be parked on incapacity benefit, that high unemployment was to be expected and that there was no realistic prospect of such people returning to work.

Many of those people sought to return to work, although in many cases they faced formidable obstacles in order to do so. The Government have a responsibility, which we discharge through reform of the benefits and tax systems, the introduction of the minimum wage and measures to make work pay, and an obligation to remove the poverty trap and the barriers in the benefits system that prevent those who want to work going into the labour market.

However, for a significant number of people work is simply not an option, and the Government are doing more to help the poorest and most severely disabled people who cannot work. The regulations will help those people by the provision of incapacity benefit for people disabled early in life who have never had the opportunity to earn, and who in the past would have claimed severe disablement allowance. They will now be able to claim incapacity benefit, and will be some £26 a week better off as a result.

Last week, we also announced a further improvement to the disability income guarantee, which will come into effect in April next year. When we initially proposed it in our Green Paper on disability benefits, we were talking about providing an additional premium within income support for severely disabled people of £5.75 a week for a single person, which would have raised the overall benefit package under the disability income guarantee to £128 a week. After last week's announcement, those people will receive not £128, but £142 a week when the disability income guarantee comes into effect in April next year.

At the same time last week we announced our intention to increase the disabled child premium within income support. We intend to raise it, in April next year, from the current rate of £22.25 a week to £30 a week—a real increase of £7.40 a week for families with disabled children.

We also announced substantial improvements for carers. For those carers who cannot work and are on the lowest incomes there will be a £10 increase in the carer premium. We will introduce an eight-week run-on period for carers who face bereavement on the death of the person for whom they cared, for which the Carers National Association has campaigned for a long time. For those who are able to combine the high level of caring that entitles them to invalid carers allowance with employment, we have increased the earnings limit so that they can earn more before losing that allowance.

Those measures will increase Government spending on disability benefits for next year by £200 million a year, and over the period 2001-04 they will account for £750 million of additional expenditure on benefits for disabled people and carers. That is far more than the changes to incapacity benefit that we are discussing today will save. The measures have not been introduced to cut costs, but as part of a modernisation programme to create conditions that will make it possible to give support to the most severely disabled people, while helping those who are on incapacity benefits but want to work.

The Government listened carefully to the concerns that were raised during the passage of the Welfare Reform and Pensions Act 1999, and the regulations deal with many of them. The regulations seek to amend the Social Security (Incapacity Benefit) Regulations 1994, and also make some minor amendments to the Social Security (Claims and Payments) Regulations 1987, the Social Security (Credits) Regulations 1975 and the Social Security (Payments on Account, Overpayments and Recovery) Regulations 1988. I do not intend to go through the regulations one by one, unless the Committee encourages me to do so, but I will concentrate instead on the more important changes being proposed to the incapacity benefit regulations.

We are making amendments in three principal areas. First, the national insurance contribution conditions for new claims are being changed. Secondly, occupational and personal pension income in excess of £85 a week will be taken into account for new claims from April 2001. Thirdly, incapacity benefit will be extended to long-term incapacitated young people aged 16 to 19, and in some circumstances to those aged under 25. I must stress that all our proposals apply only to new claims made after 6 April 2001, and that existing beneficiaries, at the point of change, will not be affected by the measures.

The regulations amend the contribution conditions for incapacity benefit so that only people who have paid contributions in one of the three tax years prior to the claim will qualify. Nevertheless, we recognise that there are situations where it is unreasonable to expect people to have worked and contributed during the past three tax years. The regulations, therefore, provide that carers who currently qualify for incapacity benefit after receiving invalid care allowance will be able to continue to do so on the same basis as now—that is, through contributions paid in any tax year. I should emphasise that it will not be necessary for the person to have been working immediately before they started caring.

Special protection is also being provided to people receiving the disabled persons tax credit who earn below the lower earnings limit, so that they can re-qualify for incapacity benefit beyond the normal linking rules. People on the credit are already helped by a special two-year linking rule in incapacity benefit that allows them to return to benefit at the same point at which they left it. However, we recognise that such people could be disadvantaged if they stayed in work for more than two years. Consequently, the regulations provide that a person in that position can re-qualify for incapacity benefit as now, on the basis of contributions paid in any tax year rather than in one of the most recent three.

Mr. Gerald Bermingham (St. Helens, South): My hon. Friend the Minister can probably anticipate what I am about to ask, as I have written to him concerning this growing problem. I welcome the fact that pensions can now be discounted for incapacity benefit purposes. However, there has been a change in how local authority councillors are paid, and they now receive an annual fee rather than an attendance allowance. Why are those councillors in receipt of incapacity benefit now doubly penalised by the reduction of incapacity benefit in other benefit situations? They have to pay income tax and stamps on their council allowances. Why cannot steps be taken to correct that anomaly?

Mr. Bayley: The question has been brought to my attention by my hon. Friend and other hon. Members. As a result of representations made to me, new regulations were published some months ago to restore the link—doing so seemed simple and straightforward—between the councillors' allowance limit in incapacity benefit and the therapeutic earnings limit, which had been broken a year or so before.

There is a more favourable regime for councillors than applies to anyone else on incapacity benefit in relation to earnings. Someone who has received incapacity benefit and worked under the therapeutic earnings limit will forgo his ability to claim incapacity benefit once he has gone over the limit. We recognise councillors' special position, and we would not want to provide a bar to prevent people from seeking election to represent their community on a local authority. Councillors can therefore retain their incapacity benefit and yet earn more than the therapeutic earnings limit, although they lose, pound for pound, penny for penny, what they receive in councillors' allowances in addition.

There is no reason why councillors should be worse off because of the changes, although certain councillors who have preserved rights and receive incapacity benefit on the basis of a previous claim to invalidity benefit have seen a change in their tax rules. Every person moved from invalidity benefit to incapacity benefit faces that change. I am not convinced that it would be fair to give a tax advantage to members of local authorities that was not enjoyed by other people in the same benefit circumstances.

There will be safeguards for people who leave incapacity benefit and have to return to it before they have had time to build up sufficient national insurance contributions to re-establish their entitlement. That group of people already receives protection because of the 52-week linking rule introduced in October 1998. To ensure that people will not lose out under the new contributions test, the regulations provide for the relaxation of the test when someone has been on incapacity benefit in the tax year before the claim.

I come now to the occupational and other pension payment proposals. The regulations exempt severely disabled people in receipt of the highest rate of care component of disability living allowance from the abatement of incapacity benefit on account of pensions payments. We are also exempting three other forms of payment from the abatement provisions. The first includes individual permanent health insurance arranged by the employee, permanent health insurance payment, for which the employee has contributed more than 50 per cent. of a premium, and health insurance that is intended to cover treatment costs.

We will take account of permanent health insurance only where an employer has arranged it and the contract of employment has ended with that employer. We also recognise that there will be circumstances in which it will not be appropriate for occupational and personal pensions to be taken into account. The regulations therefore provide for occupational and personal pensions not to be taken into account where the pension payments are in connection with the death of a member of a scheme or where an occupational pension scheme is in deficit or has insufficient resources to pay the full pensions. The regulations also provide details of how pension income cases are to be administered.

The Act extends incapacity benefit to people aged between 16 and 19 who were incapacitated in youth and are unable to meet the normal national insurance conditions because of illness or disability. Following representations received during the passage of the Act that our intention to extend the age cut-off to 25 for people in higher education would not help certain young people with severe learning difficulties who are in mainstream education beyond the age of 20, we decided to widen the concession to include people in any form of education or work-based training. I know that that further concession was regarded as good news by Mencap.

The regulations set out how a person aged above 20, but below 25, can be permitted to receive incapacity benefit above the usual age cut-off of 20. The prescribed conditions are that a person must have been registered for and attended a course of full-time advanced or secondary education or vocational or work-based training for at least three months before he reached the age of 20. The course must have ended no earlier than one of the last two complete tax years before the year in which the benefit is claimed. For example, if a person's course ended in May 2002, he could still claim incapacity benefit under the youth provisions as late as December 2004, provided that he was still aged under 25 at that time.

We were also asked to help those who take up employment and earn below the lower earnings limit for a lengthy period before again becoming incapable of work. The regulations therefore enable people who leave incapacity benefit under the youth provisions for paid employment or training to requalify and do so for periods beyond the normal linking rules. People on disabled persons tax credit can return to incapacity benefit at the same level as they left it if they become incapable of work within two years, provided that they receive disabled persons tax credit for the week in which their contract ended.

However, we recognise that people who have worked for more than two years and had earnings below the lower earnings limit would not be able to qualify for incapacity benefit under that rule. The regulations therefore modify the rules to allow people entitled to incapacity benefit under the youth provisions and who are aged 20 or over, or where the education rules apply, 25 or over, to requalify for incapacity benefit outside the normal linking rules where they left incapacity benefit to work and have paid, or been credited with, contributions in both preceding tax years and have received disabled persons tax credit in at least one week in the preceding tax year. If they have not received disabled persons tax credit, they could requalify if they left incapacity benefit to work, earned less than the lower earnings limit in the past three tax years and made a fresh claim for benefit within 56 days of leaving employment.


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Prepared 16 November 2000